Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on EDENRED. We currently have 5 research reports from 1 professional analysts.
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Core business remains strong; corporate payments to become the third growth engine
13 Dec 16
Edenred reported 9M FY16 results (ending 30 September) broadly in line with our estimates. The lfl revenue increased by +7% (Q3: +9.1%, Q2: +6.9%, Q1: +5.2%; our estimate: +4.5%), despite clocking a 1.9% decline in financial revenue (13.3% decline in Europe, partially offset by +7.3% growth in Latin America). Total reported revenue came in at €804m (+2.8% vs our estimate of +2.9%), on account of currency headwinds (-8.4% yoy; largely due to the depreciation of the Brazilian real and Mexican peso vs the euro), and partially offset by a 4.2% positive scope impact (primarily related to Embratec’s integration in Brazil). The take-up rate was unchanged yoy at 4.6%. Issue Volume (IV) increased by +8.9% on a lfl basis (Q3: +10.2%, Q2: +9.3%, Q1: +7.4%; our estimate: +7.2%), reflecting strong growth across all major regions. Europe was up 7.7% (Q3: +6.4%, Q2: +9.7%, Q1: +6.9%; accounts for c.48% of the group’s IV), once again driven by Central Europe (+8.5%; reflecting improving economic conditions) and France (+4.6%; due to solid gains in Ticket Restaurant solutions). Despite challenging macro-economic conditions, the LatAm region reported a strong sequential improvement (Q3: +14.3%, Q2: +8.7%, Q1: +7.5%; accounts for c.48% of the group’s IV), propelled by Hispanic LatAm (+18.4% yoy; employee benefit solution growth of 24.3%). Also, Brazil was up 4.5% on the back of strong growth in the expense management business (+15.7% yoy). Management has reiterated its FY16 guidance: IV organic growth of 8-14% (we go for the lower end of the range), EBIT to range €350-370m (vs our estimate of €351m), operating flow-through ratio to remain above 50% and FFO to grow by over 10% organically. Furthermore, a promising three-year plan (called Fast Forward) was announced at the investors’ day. The company aims to accelerate organic revenue and EBIT growth to over 7% and 9%, respectively, by adopting the following measures: 1. Acquire a controlling interest in UTA by exercising the call option to purchase an additional 17% stake (thus bringing the total to 51%). The move will increase the expense management business’s contribution to the group’s IV from 17% to 30% post consolidation. 2. Achieve double-digit organic revenue growth in expense management and mid single-digit in the employee benefits business through various initiatives. 3. Expansion in the corporate payments ecosystem (manage financial transaction flows among various companies across geographies). This encompasses the use of virtual card technology and establishing a private payment network by leveraging its authorisation platform, PrePay Solutions (70% owned JV with Mastercard). 4. Slashing the dividend pay-out ratio to at least 80% (currently >90% of recurring profit after tax) in order to augment the investment in the corporate payments business.
Organic momentum continues; FX spoils the party again
03 Oct 16
Edenred reported H1 FY16 results broadly in line with our estimates. The lfl revenue increased by +6.1% (Q2 16: +6.9%, Q1 16: +5.2%; our estimate: +4.7%), despite clocking a 1.6% decline in financial revenue (15.4% decline in Europe, partially offset by +9.8% growth in Latin America). However, the reported revenue was down 2.4% (vs our estimate: +3%) to €526m, on account of currency headwinds (-10.8% yoy; largely due to the depreciation of Brazilian real and Mexican peso vs the euro), and partially offset by a +2.3% scope effect. The take-up rate declined to 4.6% during the period (-10bp yoy). Issue Volume (IV) grew by +8.4% on a lfl basis (Q2 16: +9.3%, Q1 16: +7.4%), largely driven by a sequential improvement in the European region (Q2 16: +9.7%, Q1 16: +6.9%, Q4 16: +5.4%; c.50% of total IV). Within the region, “Europe – excluding France” led the momentum (+9.9% yoy; reflecting favourable economic dynamics in Central Europe and a positive calendar effect), followed by an improved performance in France (+5.2%; driven by the Ticket Restaurant business). Despite challenging macro-economic conditions, the LatAm region clocked +8.1% growth (Q2 16: +8.7%, Q1 16: +7.5%; our estimate: +7.5%; accounts for c.45% of total IV), primarily driven by the Hispanic LatAm business (+13.8%; led by +19.1% growth in employee benefit solutions). Also, Brazil was up 4.5% on the back of strong growth in the expense management business (+16.8% yoy). The company issued a €250m Schuldschein loan (fixed + floating rate; average financing cost of 1.2% and maturity of 6.1 years) and signed an agreement in July to extend the €700m undrawn revolving credit facility by two years to July 2021. Management has reconfirmed its FY16 guidance: IV organic growth of 8-14% (lower end of the range), EBIT to range €350-370m (vs our estimate of €351m), operating flow-through ratio to remain above 50% and FFO to grow by over 10% organically.
Brazil continues to drag, European recovery fuels the growth
14 May 16
Edenred reported Q1 16 results below our estimates. The total revenue increased by 5.2% on a lfl basis (vs Q4 15: +5.4% and Q3 15: +4.9%), despite clocking a 3.1% decrease in the financial revenue. However, the reported revenue was down 5.2% (vs Q4 15: -2.5%, Q3 15: -4.3% and our estimate: +2.4%) on account of currency headwinds (-12.3% yoy; mainly due to the Brazilian real and Mexican peso), and partly offset by the scope effect (+1.9%; integration of ProwebCE business in France). The take-up rate declined to 4.6% in the quarter (vs 4.7% in Q1 15). On Issue Volume (IV), Edenred posted growth of 7.4% on a lfl basis (vs Q4 15: +8.4% and Q3 15: +7.0%), on the back of better growth in Europe (Q1: +6.9% vs Q4 15: +5.4% and Q3 15: +4.1%), with France (+4.2% vs Q4 15: 3.9% and Q3 15: +3.3%) leading the momentum, driven by the Ticket Restaurant business. However, the macro-economic challenges continued in the LatAm business (Q1: +7.5% vs Q4 15: +10.9%), largely due to the sequential growth slowdown in Brazil (Q1 16: 5.3% vs Q4 15: +5.4% and Q3 15: +5.7%); on the contrary, the Expense Management continued to post robust growth (+19.2% vs Q4: +18.8%, H1 15: 27.5%). The Embratec JV in Brazil (65%-owned by Edenred and 35%-owned by Embratec’s founding shareholders) is expected to be completed in the first-half of 2016. Management expects the organic IV growth at the lower end of the medium-term target of 8-14% in FY 16.
Q3 in line; LatAm leverages Expense Management potential
14 Oct 15
Edenred reported Q3 15 results in line with our expectations. Total revenue for 9M was up 6.8% on a lfl basis; however, on a reported basis, revenue was up 5.6% to €782m (post negative currency impact of -4.6% and +3.4% scope effect); this compares to our FY 15 estimate of €1,031m. On Issue Volume (IV), Edenred posted a growth of 8.7% in 9M and 7% in Q3 on a lfl basis (vs. our FY15 estimate of 8.1%), helped by better growth in Europe (3.7% in 9M and 4.1% in Q3). While rising unemployment levels in Brazil continued to impact the Employee Benefits business (+5.8% in 9M; +2% in Q3 vs. +8% in H1), overall IV in Brazil witnessed healthy growth of 9.7% in 9M (vs. +11.5% in H1) on the back of new client wins in the Expense Management business (+24.7% in 9M; +20.2% in Q3 vs. +27.5% in H1). On account of the sliding Brazilian real, management cut its operating profit target to €340-355m (vs. earlier guidance of €365-380m); this is in line with our estimate of €340m (as we incorporated currency woes in our 11 September update). Nonetheless, the company reiterated its guidance of 8-14% lfl growth in IV and its dividend policy of distributing >90% of recurring net profit after tax.
Resilient LatAm growth alongside digitalisation benefits for France
29 Jul 15
A good set of H1 numbers, particularly in the backdrop of a deteriorating economic scenario in Brazil which is a key market for Edenred (i.e. 50% of Issue Volume). - Brazil posted strong IV lfl growth (11.9%), despite some impact from rising unemployment on the Benefits business (IV lfl: 8%), primarily on the back of the robust pick-up in the Expense management business (IV lfl: 27.5%). The company continues to offset the macro blues through its digitalisation growth (now 66% at the group level) and its execution on the ground with a major partnership announced with Daimler. - Overall, IV growth was 9.5% and 9.6% on a lfl basis (vs. 1.5% and 12.3% in H1 14). While penetration growth and new solutions broadly held up (H1 15 vs H1 14: 4.6% vs 5.4% and 2.3% vs 2.5%, respectively), growth from voucher face value increases slumped to 2.5% (H1 14: 4.2%) as guided by the management earlier. Another key positive was EBIT growth of 11.5% to €165m despite a €6m FX impact, with lfl growth of 14.6% vs. 13.2% in H1 14; EBIT for the operating business increased 19.5% vs 17% in H1 14 on a lfl basis. This was primarily on the back of a 130bp improvement in the EBIT margin for LatAm to 43.8% (H1 14: 42.5%). Management confirmed its full-year guidance of 8-14% lfl growth in IV, revenue growth at a difference of 100bp to IV growth and set the EBIT target at €365-380m, incorporating a €23m FX impact given the FX rate of 3.47BRL/USD at the end of H1, i.e. 30 June 2015.
Emerging from the clouds
16 Feb 17
Rolls-Royce’s underlying performance in FY16 was ahead of both its own and market expectations. Media focus on the non-cash £4.4bn headline FX loss is missing what looks to be the basis for optimism. As the civil model starts to move from investment in engines for the A350 and A330neo into the aftermarket delivery phase over the remainder of the decade, we think cash flow is likely to improve, particularly if supported by an eventual recovery in Marine.
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
15 Feb 17
At the current market capitalisation of £29m, we believe the shares are significantly undervalued. We estimate that the highly profitable Maritime business is alone worth at least £40m. With net cash of £9m at end-2016, this implies that the market is currently ascribing a combined negative value of £17m to the rest of the group, which together account for c.54% of group revenues. This is very harsh given the management actions to transform TP Group to a profit-driven Tier 2 specialist services and engineering company are bearing fruits across the divisions. TPG Managed Solutions is expected to more than double its profits in 2017, while TPG Engineering and Design & Technology are on course to deliver sustainable profits from 2019. Even if we ascribe zero value to Engineering, Design & Technology and Managed Solutions, the shares are worth 9.5p a share, a 38% upside from the current share price. BUY.
Taking the bull by the horns
15 Feb 17
Avon Rubber announced this morning that CEO Rob Rennie has left and been replaced with Paul McDonald, formerly managing director of Avon’s Dairy division. This news comes as a surprise and is likely to raise some questions over the CEO and CFO transition, with the CEO only being in post for just over a year. However, the group has appointed an executive already known to many who have followed the business, and as such should be seen as a good appointment with a track record of decisiveness and getting things done.
Share & share alike
14 Feb 17
The rally in the last fortnight, highlighted in the table, reflects a continued flow of positive updates and economic news. The FTSE 250, Small cap and Fledgling indices have reached record highs. We are in the lull ahead of results for those companies with a December year end, a welter of economic data regarding the UK economy, the State of the Union address in the US on 28 February and the UK Budget on Wednesday 8 March. We will learn at that stage the latest forecasts from the Office of Budget Responsibility. As highlighted previously, the reaction to corporate updates will continue to set the tone.